Making a will is very important if you care what happens to your money and your belongings after you die, and most of us do. But have you tried to talk with your parents about their will? If that conversation isn’t happening, you’re not alone.
And it’s not only parents that are the only ones who are uncomfortable. Adult children may also be nervous about raising the topic of their parents’ finances for fear they appear greedy or nosy. Understandably talking about dying can be seen as ‘taboo’ and it is not always easy to bring it up. However, discussing your will with beneficiaries means they are better prepared when the time comes.
However, worryingly almost six and half million adults refuse to discuss their will with loved ones according to new research. A quarter of people with a will say they will not discuss it as they do not want to think about dying and one in four do not want to upset beneficiaries by discussing the contents of their will.
It is also hugely important for family members to be aware of vital decisions in your will, such as who will look after your children. By overcoming ‘death anxiety,’ the natural fear of talking about death and the emotions associated with it, these important conversations can ensure your beneficiaries are aware of your wishes and understand them.
Nearly half of UK parents, the research identified, with adult children believe their will is ‘no one’s business’ but their own or a partners. But sharing the contents of a will makes the financial and practical consequences of death easier for those left behind. Losing someone can have a huge impact on finances for months or even years to come, so it is crucial for families to be prepared.
Four reasons why you need a will...
- A will makes it much easier for your family or friends to sort everything out when you die – without a will the process can be more time consuming and stressful.
- If you don’t write a will, everything you own will be shared out in a standard way defined by the law – which isn’t always the way you might want.
- A will can help reduce the amount of Inheritance Tax that might be payable on the value of the property and money you leave behind.
- Writing a will is especially important if you have children or
other family who depend on you financially, or if you want to leave
something to people outside your immediate family.
Don’t delay
It’s easy to make a will – and it will save your family unnecessary distress at an already difficult time.
What happens if you don't leave a will?
If you don’t have a will when you die, your money, property and possessions will be shared out according to the law instead of your wishes. This can mean they pass to someone you hadn’t intended – or that someone you want to pass things on to ends up with nothing.When you die without leaving a will, the law decides who gets what and how much.
It doesn’t matter what your relationship with those people was like when you were alive.
By leaving a will that says clearly who should get your property and money when you die, you can prevent unnecessary distress at an already difficult time for your family or friends.
Some parents have had to sue their own children to get a share of their partner’s estate when their unmarried partner dies.
The law says that in this situation the children get everything.
What is a will trust?
A will trust is a trust created within a person's will and is a relationship between three parties:
- the testator settlor is the person transferring assets into the trust
- the trustees are the persons who hold the asset for the benefit of a third party
- the beneficiary is the person who benefits from the trust
However, when it comes to helping family through trusts in wills, the ‘testator’ (the person making the will) needs to consider the impact of family law and taxation.
How does divorce affect trusts?
The matrimonial courts, for example, have powers during divorce cases to make financial settlement orders based on a person’s wealth, not just in their own name but also assets put into trust for them. While the court cannot force trustees to make provision from the trust to the beneficiary to meet their financial settlement obligations on divorce, they can use ‘judicial encouragement’ when they have explored the nature of the trust and the history of distributions made.
Nuptial settlements are made primarily for the benefit of one family member and their spouse and issue. If the key beneficiary is the one getting divorced and they have been used to having all their requests for funds met by the trustees then it is highly likely the matrimonial court will take the trust fund into account when making their order for financial settlement on divorce.
It is therefore risky to separate an ‘estate’ (money, property and possessions) between siblings, leaving each a share in their own trust, rather than leave the whole estate in a single trust for the benefit of a wide range of beneficiaries, such as all the siblings, their spouses or civil partners and their issue. This sort of trust is unlikely to be regarded as a nuptial settlement and therefore would not be considered on any beneficiary’s divorce.
How does inheritance tax affect trusts?
While inheritance tax applies to an estate on death, it also applies going forward to trusts created under the will. The rule is that any trusts created by a will are deemed to start for inheritance tax on the date of death.
Where a settlor creates trusts on the same day they are known as ‘related settlements’
and this means they must be added together when calculating inheritance tax charges on each trust
in the future.
Should I create separate trusts for different members of my family?
If the family wish to have separate trusts for different branches of the family, and still wish to use the pilot trust system to achieve this, it should be considered that there is not a great deal of inheritance tax saving and there are also potential family law issues. The costs of administering numerous trusts and complying with complex regulations are also increased.
It therefore makes sense for many clients to have one discretionary trust in the will which benefits all siblings and their families. Inheritance tax will be charged on the total relevant property, so there is no tax saving, but there will be some family law protection and hopefully less administration costs.
1. A Financial Overview
2. A Master Directory
3. A Plan for your Personal Property
4. A Plan for your Pets
5. A Digital Estate Plan
While an advance directive (or living will) details your attitude toward life-extending care, these tend to be fairly generic. If you’d like to add additional background for your spouse, children, or other loved ones who might be making healthcare decisions on your behalf. It's also worthwhile spelling out your wishes for funerals, memorials, and the disposition of your body, either verbally, in writing, or both - even if your wishes are simply to let your loved ones decide.
Last but not least, consider writing or recording an ethical will that spells out your beliefs and values. In contrast with a conventional will, which lays out how you’d like your financial and physical property to be distributed, an ethical will is a way to "hand down" your belief system to your loved ones.
A testamentary PPT can only be executed whilst both partners remain alive. Upon death of the first partner, their Will specifies that their share of the property is placed into trust and names the ultimate beneficiary of this share, normally the children and grandchildren of the deceased. The surviving partner, under the terms of the trust, has the unequivocal right to remain living in the property for the rest of their life.
On the death of the second partner the Trust comes to an end and the property passes to the beneficiaries. As the surviving partner does not own the deceased’s share of the property it is fully protected for the beneficiaries, so if the surviving partner requires care, or even remarries, this share of the children’s inheritance is protected. This last point can be particular interest to couples who have come together and have children with different partners.
A PPT can help each person in a relationship ensuring that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life. If the surviving partner wants to move to another property, they can still sell the property and the proceeds to be used to purchase a new property, the terms of the Trust remain over the new property.
If you do not have a Will, you have no say over what happens to your assets when you die and this can cause difficulties for those you care about most.
Because of this, everyone should have a Will ; this is particularly true if you own property, are married , have entered a civil partnership or have a long-term partner . It also applies if you have children or other dependants , or if you wish to leave something to someone who is not a close family member.It is a common belief that, if you are married or in a civil partnership, your spouse or civil partner will automatically inherit everything you own when you die. In fact, the law sets out rules that determine how your assets are to be divided if you should die without leaving a Will .
Do you want your home and wealth to go to your children or other loved ones? Have you ever considered what the effect might be on your savings and investments, or even your home?
Most people assume that their assets will pass on to their children or other relatives in due course, yet this may not always be the case unless careful arrangements have been made to protect these assets from being taken to pay care home fees.
Thanks to advances in medical science and a general improvement in health and fitness, everybody is living longer, though not necessarily able to take care of themselves. Figures show that 1 in 2 women and 1 in 3 men will require long-term residential care at some point in their lives.
A Protective Property Trust (PPT) can be established which will help to protect your estate from being taken to pay for care home fees.
The Property Trust can only be created whilst both partners remain alive . Normally with couples the property is divided 50/50, though these percentages can be different. Upon the first death, their share of the property is placed into the Trust to be administered by the Trustees.
The Will also specifies who is to be the ultimate beneficiary of this share in the property and this would normally be the surviving children of the deceased. The surviving partner, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second partner the Trust comes to an end and the property passes absolutely to the beneficiaries. The surviving partner does not own the deceased's share of the property.
If the surviving partner chooses to sell and move to another property the proceeds from the sale can be used to purchase the second property and the terms of the Trust remain over the second property. If there is any excess capital following a sale then the money is invested and the surviving partner can take the interest that is generated as an income.
The deceased's share in the property is fully protected for the beneficiaries, so even if the surviving partner remarries, the children's inheritance is protected. This last point can be of particular interest to couples who have come together and have children from different partners. A PPT can help each person in a relationship ensure that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life.
Everybody wants to protect their assets for the benefit of their family and loved ones. We are all motivated to provide for our children throughout their lives and want what is best for them. Many people will think about or draft a Will hoping to ensure that the assets that they have worked hard for, are passed on to their children and chosen beneficiaries after their death.
However, a Will can only dispose of the assets that you own at the date of your death and if the value of these have decreased during your lifetime, there will be little if anything left for your beneficiaries to inherit.
Lifetime Living Trusts are specifically designed to protect your assets for you during your lifetime . Giving you the peace of mind that your estate can be passed on securely and intact to your loved ones, after your death.
During your lifetime
Once a Trust has been created, you can use it to 'ring-fence' your assets . Most people will protect their home and their savings, leaving capital in their bank or other savings accounts for ongoing living expenses. Income from savings protected within the Trust can be paid directly into your bank account to supplement income from earnings or pensions. Assets can be added and removed from the Trust during your lifetime . If you have large expenses that cannot be met out of normal income, like a new car, holiday, or house repairs, the appropriate sum can be transferred to your bank account from the Trust.
You are named as the 'Principal Beneficiary' of the Trust and retain full control of the assets while you are alive. You are free to move home, or release equity from the Trust at any time. As the Principal Beneficiary of the Trust, you have a guaranteed right of occupation in the property for the remainder of your life. The Trustees, usually your children, cannot evict you under any circumstances.
You can direct the Trustees to sell the property and to buy a
new property of your choice. If the new
property you are acquiring is more expensive, the Trustees
can only be required to buy the new property if the additional capital
required is paid into the Trust by you. The Trust is equally applicable to married couples and to single people.
If you lose mental capacity
If you lose mental capacity, the law states that you are no
longer allowed to manage your own affairs. Assets held within the Trust
will then be managed by your Trustees on your behalf.
Your Trustees can effectively 'stand in your shoes'
to make
decisions on your behalf but these must be for your benefit
. They are
able to add or remove assets or use the income from
the Trust to help you and improve the quality of your life.
Assets held outside the Trust will fall under the control of the courts.
After your death
After your death, the Trust continues to work to protect
your assets
for your beneficiaries. The Trust can continue to hold the
assets
safely within it, or pay them out to the specified
beneficiaries. The Trust is extremely flexible
after your death and has
the potential to continue protecting your family for 125 years
from the date it was created. That means that all of the
benefits described in this document can not only protect you and your
children but can also protect your grandchildren and
great-grandchildren.
